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Germans Tax law: 10.000 EUR stupid loss rule

There is new law, exposed by german government in december 2019.
From 01.01.2021 it is not allowed to calculate losses against profits, which exceeds 10.000 EUR (§ 20 Absatz 6 Satz 5 EStG), even within a single year.

For example, if you have profit trades of 100.000 EUR vs loss trades of 85.000 EUR, you have a total gain of 15.000 EUR. Until 31.12.2020 you pay tax (25% = 3.750 EUR) for this 15.000 EUR. Now, with the updated law, only 10.000 EUR can be calculated against the 100.000 EUR profit. Means, your gain for tax is 90.000 EUR. Your tax is now 25% of 90K = 22.500 EUR (which is more than your total profit at all). Crazy, but true!

See explanation here:https://www.godmode-trader.de/artikel/die-schlimmsten-befuerchtungen-bewahrheiten-sich,8027934

Is it now a monetary suicide to use Darwinex, by investing or trading in Darwins?
Does Darwinex plan to fill a lawsuit in court?

Any opinions?

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Do you know whether there were changes for losses from previous years including 2020?

edit:
the worst point, paying taxes on every single winning trade, does not affect Darwinex:
Nicht betroffen sind Kunden von Brokern im Ausland, die keine Abgeltungsteuer abführen und bei denen Trader ohnehin eine Steuererklärung abgeben müssen. Hier gibt es keinen unterjährigen Abzug der Abgeltungsteuer. Die Verlustverrechnung ist aber natürlich auch bei diesen Brokern auf 10.000 Euro pro Jahr begrenzt.

Tradeslide - the broker of Darwinex - is in London and you don’t pay the 25% tax on every winning trade as you would do with any German broker. I think they don’t want to make any broker business anymore in Germany. That would really cause a problem here as in the tax report every trade has to be listed.

I can’t believe that the authorities want to read 400 and more pages of the detailed yearly tax report.

Edit 2: and a Darwin’s investor does not trade what’s written in the tax report … so this law would make a new asset class out of the Darwin? :yawning_face:

Reading the original source (embedded in the article of your link) again I am not sure that forex and CFDs are affected by this change.
Is that written anywhere?

That’s an interesting point, which needs to be clarified. But it is likely, because the law affects also derivats of futures, which CFDs are. There are a lot of posts and articles about this topic, created in the past days. Some of them mentioned CFDs as well.

CFDs and Forex don’t have a date when the contract must be filled, but futures and options have. Also most knock out warrants have a deadline. I didn’t find anything about unlimited warrants in the legal text.
That’s a difference in the original text.

Just in Forex and most CFDs - besides some , based on futures - you don’t get information about structures or refinancing. For most minors it is not possible directly, and the business model of the provider should be different.

The panic and worries about the change might mix too much.

CFDs are generally counted as “Termingeschäft” (engl. forward contract). You can find a lot of sources about this fact by googling around, e.g. https://de.wikipedia.org/wiki/Differenzkontrakt.

So the panic is for real. With current law, it will be impossible to trade with CFDs or to be invested via Darwins. Currently, the single trades are not part of the annual tax report of Darwinex, as they are in monthly tax report. In front of the new law, the local tax office might request a detailed trade list instead of a gross profit statement (as other brokers expose already).

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How can it be that being such an important news item, not all financial websites are talking about it?
I don’t get it. :thinking:

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Index and stock CFDs as offered here are equity swaps, not forwarding contracts. Just because they have no payment date when the contract runs out. So forwarding to … ?

Maybe someone should ask the authorities concrete for Forex and equity swaps. I wonder why nobody of the internet pages did that until now. Same is with unlimited warrants.

I‘m sure this rule will kill a special segment of the German financial industry.

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I know, it doesn’t make sense from definition of a forward contract. But don’t ask for sense, the law is senseless at all.
They are just counted to this category, probably for the same reason of this law: the authors of the law are far away from having knowledge about financial instruments. So they know classic shares and others…
There exists also open-end knock out papers, which will never terminate by time, but they are counted to this category as well.
The problem is finally the current unknown about the topic at all. The law might be acting against the constitution or basic law, but we cannot be sure right now. So this year is more or less safe, because it is related to 2021. But if there is no clarification until end of year, what then? If we trade as usual and wait for tax statement somewhere end of 2022 or 2023 another year is gone (with same trading style). This could generate a lot of private insolvencies, if they request tens of thousands euros for even one year.

You always have the opportunity to declare yourself as professional trader and lose the advantage of the reduced rate. They also have to check that today if your other income is so low that your income tax rate is less than 25%. That’s the theory.
I don’t know what they do if you declare professional losses this way. I also don’t know what’s needed to be accepted as professional trader.

I’ve read that professional trader also have increased admin overhead.

That trading magazin has released a new article with 3 sample trading styles and they still expect that CFD’s are affected by the law.

I’m not clear if traders (or investors) who trade with a broker like Darwinex in the UK, would also be affected

one more article on the main German television website ARD. In my understanding they confirm what was said on Godmodtrader (also about CFD).

The banks believe that the law may be unconstitutional

Bereits Ende letzten Jahres hat der Bundesverband deutscher Banken (BdB) erhebliche verfassungsrechtliche Bedenken gegen die Pläne geäußert. Dass Gewinne komplett besteuert, Verluste dagegen möglicherweise nur partiell anerkannt werden sollen, sei nicht zu rechtfertigen.
https://www.onvista.de/news/aenderung-am-einkommenssteuergesetz-verlustrechnung-fuer-derivate-wird-ab-2021-deutlich-erschwert-10-000-euro-als-obergrenze-319414657

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Thank you for the links.
If Trader C in the first link does not have these 100.000 EUR (it’s not needed to trade the volumes listed with CFDs and futures) to pay the taxes the law and the financial authorities will drive him in private insolvency. I was waiting for somebody publishing this example.

It would be also the dead for German investors in any Darwin, because an investor doesn’t really trade the Darwin as expected, but all its Trades are just copied. You can see this in monthly tax report, where all single forex trades of all selected Darwins are listed (as the investor would have made himself). The year tax report does not contain it so far, but exposes only the gross profit.
After 2021 the German tax office might not accept this statement any longer and could request a list of individual trades. As a result the net profit and net loss can be calculated and the 10k rule adopted, with all known consequences.
So also Darwinex should have an interest to fight against this law.

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It’s not only Darwinex, all social trading platform available in Germany are affected and should try to fight against this rule. They treat it very different to the Austrian Wikifolio, who make tradable certificates with ISIN out of every strategy.
If this minister and his staff don’t understand social trading, they should exclude it as they do with mutual funds where the investor also has no influence on the trading strategy.
The few GermanForex and CFD brokers should explain them that their business model is destroyed, but I am not sure whether this stupid government will take care about that.

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Today I want to share an example which every trader and broker in the world could understand and understand the problems every German trader will have from 2021 when using a successful EA on a midsize account.

This example shows the backtesting results for trading 1.328 trades with it in one year (2019) with activated money management on a 10k account when trading 1 microlot (0.01 lots) for 1k:


That would mean that instead of 25% of the profit of 23k (about 4.600 EUR) I would be charged for 25 % out of 151 344.68 EUR = 39.916 EUR taxes (including “Soli” - Germans undertand that :wink:). That is significantly more than the deposit and the real net profit.

Nobody who is able to use a calculater and/or the MT4 tester would continue to trade an EA in 2021 with a normal account size.

If I trade it only with a 1k account I get the following results, which are in line with the stupid loss rule:


Of course we have the same number of trades here, but the money management logic starts in November. At the end of the year or earlier I would have to take money out - to let this small account survive.

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Yes, guys, it is all true and they act on purpose, knowing these effects very well.
Aim is to curb speculation, as it is evil.
Don´t know, if it was already mentioned here, but you can´t calculate profits vs. losses during the year, but will be compensated after tax declaration, in the following year.

So Darwinex will have to file detailed account statements, which should be no problem, or ban German customers.
You have to stop trading, once you pass the - 10 K €, or face big, big tax risk.
You can´t fight this law, it is in force and has passed all stages.
Sorry…

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No, they don’t have to fulfill foreign rules as long as it is not an EU law. Maybe brexit will solve that.

That’s what you should believe, but it’s not the truth. The real aim is to close any opportunity for an independent income for everybody, this is just another brick in the wall.
If they would want to act against speculators, the first market to act would be real estate.

I think @ReverbingWave was being sarcastic…

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The employees of ministry of finance are just not informed about financial instruments and probably don’t have consultants for that. They probably think, to know everything. But financial minister Olaf Scholz has absolutely no knowledge. He is fine to keep his money on day-money account or passbooks as grandparents do. Thats the real problem. In economy this guy would have be chassed already, but as politican everybody can lead any ministery.

First, i think this law will be counter-fighted a lot, later within this year. A lot of germans are affected (big magazine talks about over 1 million people, because it’s not about CFD only).

Second, the question is, how a foreign broker have to fulfill german rights, especially by exposing losses. The tax office could request it, but if it’s not delivered, what can they do? They cannot assume it from anywhere. If they deny the darwinex tax statement, than they deny the winnings as well and the whole gain would be argumented as tax-free. This will not happen, so they have to accept the exposed gross profit.
I have this discussion nearly every year with my local tax office. They request a “german” tax statement of my trades of broker IC Markets. I tell them, i just have no other statement. Then they accept it and calculate the tax from total profit, because there is no choice for them.
If they don’t accept it, they cannot charge anything…

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There is another nice argument for a
constitutional lawsuit. Imagine a very simple german exchange. Only 5 Traders are participating: Trader A to F.
Each trader trades exactly the opposite of his trading partner (One trader buys, the other trades sell, etc.): Trader A makes a loss against Trader B, lets say of 40.000 EUR. Than another trade is done (not in parallel, just in sequence): Trader B makes a loss against Trader C, again 40.000 EUR. This goes on up to Trader E, which takes the final gain and makes no loss. So the circulated money is always exaclty 40.000 EUR, not less, not more.

With old tax law, the tax income of ministry is balanced to 10.000 EUR. With new tax law, the income is already 30.000 EUR, which makes it 75% of the money within the exchange. If more traders are added to the list, the tax exceeds the circulated 40.000 EUR and all have to add money to the simple world.
This is a big scam, initiated by government. Normal citizens would be convicted by law if they establish such a system.

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